Capital Gains Tax (CGT)
Also known as: CGT, capital gains
The tax paid on the profit when an investment property is sold. In Australia, a 50% discount applies if the property was held for over 12 months.
Capital Gains Tax (CGT) is the tax paid on the profit from selling an investment asset, including investment property. For Australian residents, CGT is not a separate tax; it's added to your assessable income in the year of sale and taxed at your marginal income tax rate.
The 50% CGT discount is central to Australian property investing. If you hold an investment property for more than 12 months before selling, only 50% of the capital gain is added to your taxable income. For a high-income investor in the top tax bracket (47%), the effective CGT rate on a long-held property is roughly 23.5%, considerably less than on short-term flips.
The capital gain is calculated as sale price minus cost base. Cost base includes the original purchase price, stamp duty, legal fees, and any capital improvements made during ownership. Expenses claimed as tax deductions during ownership (repairs, depreciation) generally can't be added to the cost base.
CGT doesn't apply to a principal place of residence, but does apply to investment properties, regardless of how long you've owned them. Specific exemptions (the six-year rule for former homes, for example) can preserve CGT-free status in limited circumstances. The calculation is often significant and warrants professional tax advice before selling.
Related terms
Negative Gearing
When a property's rental income is less than its holding costs, producing a tax-deductible loss that offsets other taxable income.
Stamp Duty
A state-based tax on property purchases, typically 3-5% of the purchase price. One of the largest upfront costs in an Australian property transaction.
See capital gains tax (cgt) in action
Suburbs and properties on PropRadar are analysed using the metrics in this glossary.
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